Here’s what MEPS thinks is going to happen to steel pricing …
Market sentiment for flat products has improved in recent weeks. The production curbs – amounting to 2.2 million tonnes (15 percent) in the second quarter are being extended to the end of 2005. Consequently, there is much less material now in the supply chain. Mill order books are much healthier because import volumes have so far not increased compared to 2004. These factors and higher scrap costs have prompted us to upgrade our forecast for the next twelve months.
We envisage a reasonably stable pricing picture as we enter the New Year. As Spring approaches we expect more import penetration, particularly from the Asian region. This could put negative pressure on prices because the current premium enjoyed by the North American mills is substantially above the freight costs from Asian countries. Distributor demand is picking up in the US and Canada. These are the first customers to pull in imports to meet market requirements.
We believe that the balance of probabilities lies with the higher imports exceeding the improved demand by a small amount – pushing North American prices slowly down over the Winter and into the Summer months – albeit from a higher starting point.